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Shares of on-demand healthcare provider Teladoc (NYSE: TDOC) rose as much as 13.9% Thursday in the first two hours of trading after the company announced that it would price up to 9,487,500 shares of common stock, including underwriter options for additional equity, at $16.75 per share. If fully subscribed, the offering will bring in $159 million in gross proceeds.
That's a lot of dough, and investors don't have to try hard to imagine what it will be used for: growth. Teladoc is a fast-growing telehealth pioneer, with plenty of market left to create and market share left to snag. The company expects to report $123 million in revenue in 2016 after generating just $77 million in revenue the year before. Management has guided for up to $185 million in revenue in 2017, along with a 26% uptick in membership and 50% growth in visits.
That growth makes Teladoc's $850 million market cap look relatively cheap, assuming it can turn that revenue into profits over time. That is still a distant goal, however, as it reported an operating loss of over $56 million in the first nine months of 2016. Then again, investors aren't complaining with the growth being delivered and aren't expecting profits at this time.
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The company ended September 2016 with about $75 million in cash on hand, so even after subtracting out the last quarter's burn rate, adding another $159 million (before closing fees) is pretty significant. Investors expecting an exciting year of business development will have a lot more excitement to look forward to now.
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